Two German Industrial Giants to Merge

Two of Germany’s oldest industrial titans--Thyssen and Fried. Krupp steel and engineering groups--said Tuesday that they plan to merge, ending more than a century of intense rivalry.

The companies, created by 19th century industrial barons from the Thyssen and Krupp families, built the weapons for Adolf Hitler’s armies and later helped fuel West Germany’s postwar recovery.

If completed, the merger would create Germany’s fifth-largest company, with sales of $34.7 billion.

“The merger will create a globally competitive company,” said Chairman Gerhard Cromme of Essen-based Krupp.

Dusseldorf-based Thyssen initially fended off a hostile bid from Krupp in March, but only after agreeing to merge part of its steel business with Krupp’s steel unit and study the option of a full merger.

“A merger between Thyssen and Krupp would create great joint potential, a more favorable strategic position in core businesses and a stronger position on the world market,” the firms said in a statement.

“Our studies have reached the conclusion that both companies, with their emphasis on capital goods, industrial services and steel, have similar strategies,” it said.

Eights months of exploratory talks on further cooperation and the possible merger concluded last week. The boards of Thyssen and Krupp have reached fundamental agreement to merge.

The companies said they expected cost savings from the merger of at least $260 million.

The impact of a merger on the combined work force of 190,000 employees would be small and spread throughout the companies’ worldwide operations, they said, a key signal to trade unions, whose support for the deal will be necessary to pull it off.

The statement made no mention of the terms of the merger for shareholders.

Industry analysts welcomed the announcement, saying both companies have been following similar strategies for some time and a merger would make them more competitive internationally.

“This has moved from the initial aggressive lunge to a gentler form of cooperation and there is no longer as much resistance to the idea,” Alan Coats of Merrill Lynch said. “This should be a merger for growth and for globalization.”

American depositary receipts of Thyssen rose $4 to close at $47.50. Krupp is not traded on U.S. markets.